Commercial developer wants Providence to extend tax breaks

PROVIDENCE — One of Providence’s most-prominent commercial developers wants the city to extend tax breaks tied to four downtown buildings he owns and to grant a new one on a fifth property.

Paul Grimaldi Journal Staff Writer paulegrimaldi

PROVIDENCE — One of Providence’s most-prominent commercial developers wants the city to extend tax breaks tied to four downtown buildings he owns and to grant a new one on a fifth property he wants to refurbish.

Having spent months filling in almost all of a $110-million budget deficit, the Taveras administration is wary of making agreements on any projects that would remain unprofitable without a perpetual tax break.

While not closing the door on new tax-stabilization agreements, the mayor’s preference is to freeze the commercial property tax rate for a period of time as a way to induce economic growth — not grant tax breaks to individual developers.

“Stabilizations need to make economic sense for the city, for the taxpayer and for the businesses involved,” said Michael D’Amico, director of administration for Mayor Angel Taveras.

According to D’Amico, Chace raised two issues with them: a new tax stabilization agreement on the Kinsley Building on Westminster Street, and extending existing stabilizations on four other buildings Chace helped develop through Cornish Associates, his Providence real-estate firm.

The second group of buildings comprises the Alice, Burgess O’Gorman, Peerless, and Wilkinson properties. The four are at the heart of Chace’s years-long effort to help transform downtown Providence into a neighborhood of apartments, shops and small businesses — an effort that has won him accolades from preservationists and urbanists in Rhode Island and elsewhere.

The city formally denied Chace’s request for a 15-year tax-stabilization agreement on the Kinsley, according to an Aug. 27 letter signed by D’Amico.

In the letter to Chace, D’Amico also informed the developer that the city is reluctant to extend tax stabilizations “that the city already has so generously subsidized for so long.”

The city began offering tax breaks in the mid-1990s on residential conversion projects like the ones undertaken by Chace. The impetus was to encourage redevelopment of the numerous downtown buildings that stood empty at that time.

A state law, new at the time, allows Rhode Island municipalities to discount a tax bill or exempt in whole or in part the assessed valuation of a property for 10 years if it is converted to residential use. The law covers both real estate and personal property taxes. Previously, temporary tax relief had been limited to commercial and industrial properties expected to provide long-term tax growth.

A Cornish project was the first in Providence to get a boost from the law. The Smith Building was the first in a three-stage process Chace undertook to inject new life into downtown.

The Alice Building was the second stage, with the other buildings following.

In the midst of the recent recession, the General Assembly passed legislation allowing tax agreements then in existence to be extended for five years.

Developers, including Chace, have said such tax-stabilization agreements — along with the recently reauthorized state historic preservation tax credit — are crucial to make redevelopments profitable.

The agreements save the developers thousands of dollars in a city with a commercial property rate — at $36.75 per $1,000 of assessed valuation — that is one of the highest in the country. The rate has been frozen at last year’s rate, an effort on the mayor’s part to help improve Providence’s ranking on taxes in relation to other large metro areas.

Chace will have paid $940,000 in taxes to the city at the conclusion of the four existing tax deals. The city estimates that Chace has saved $7.9 million in taxes; he would have paid $8.8 million if the buildings were taxed at full valuation during the 15-year life of the deals.

“A stabilization needs to have an end point,” D’Amico said.

Commercial projects have to reach a point where they are “self-sustaining,” he said, and can pay the full tax rate; otherwise other taxpayers are perpetually subsidizing those few with stabilization agreements.

“It doesn’t seem to make good economic sense to let it continue not to pay taxes,” D’Amico said.

The city is using a 12-year template for new tax-stabilization agreements, he said, with no taxes levied for three years, followed by a tax rate in the fourth year equal to 11 percent of the assessed value, increasing annually thereafter by 11 percentage points until the 12th year, when the property would be taxed at the full assessed value.

Chace is at a retreat this week and unavailable for comment, his assistant said.